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Quarterly State of the Market Report for PJM Q1 2026 — Monitoring Analytics - 2026-05-14

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Original source — PDF

Summary

The 2026 Q1 PJM State of the Market Report from Monitoring Analytics (the Independent Market Monitor under PJM OATT Attachment M) is the primary document behind every secondary news story on PJM’s Q1 2026 price spike. It is also the document that names the cause without paraphrase: data center load growth is the primary driver. The energy market was competitive in Q1 2026; the capacity market was not competitive on every dimension (aggregate structure, local structure, participant behavior, performance). The combined market-distorting effect of including existing and forecast data center load across the 2025/2026, 2026/2027, and 2027/2028 Base Residual Auctions was a $23.10 billion capacity-revenue increase. The portion that landed on customer bills after the “Agreement” VRR-curve cap was $13.77 billion. The IMM recommends a “Bring Your Own New Generation” (BYONG) market solution and explicitly opposes the backstop-auction proposals that would shift risk to other PJM customers.

Key points (primary-source figures)

Q1 2026 wholesale power, system-wide (Section 1):

  • Total cost of wholesale power: $77.78/MWh → $136.53/MWh (+75.5%, +$58.75/MWh)
  • Energy component: +$42.90/MWh (+78.5%) — 71.5% of the total wholesale-cost increase
  • Capacity component: +$14.21/MWh (+398.1%) — 13.0% of total wholesale cost
  • Transmission component: +$0.94/MWh (+5.3%) — 13.8% of total wholesale cost
  • Real-time load-weighted average LMP: $52.20 → $87.57/MWh (+67.8%, +$35.37)
  • Total PJM gross billing Q1: $18.69B → $36.35B (+94.5%)
  • Total Congestion Costs: $503.30M → $2,015.20M (+300.4%)
  • Total Uplift Credits: $470.2M → $979.7M (+108.4%)
  • Real-time hourly average load: 95,801 MWh → 98,749 MWh (+3.1%)

Decomposition of the $35.37/MWh LMP increase:

  • $14.92 (42.2%) — fuel and consumables
  • $9.73 (27.5%) — transmission constraint penalty factor
  • $3.56 (10.1%) — market power components
  • $1.26 (3.6%) — emissions cost
  • $0.85 (2.4%) — scarcity

Generation mix shift (Q1 2026 vs. Q1 2025):

  • Coal: −1.7%
  • Natural gas: +4.2%
  • Oil: +43.2%
  • Wind: −4.7%
  • Solar: +15.0%

Energy market net revenues for theoretical new builds (Q1 2026 vs. Q1 2025):

  • New CT: +213% | New CC: +144% | New CP (coal): +199% | New nuclear: +64%
  • New diesel: +1,326% ← the most extreme
  • New onshore wind: +29% | New offshore wind: +65% | New solar: +10%

Capacity-market data-center impact (the core finding):

  • “Data center load growth is the primary reason for recent and expected capacity market conditions, including total forecast load growth, the tight supply and demand balance, and high prices.”
  • Combined revenue increase from inclusion of existing+forecast data center load across the 2025/2026 + 2026/2027 + 2027/2028 BRAs: $23,100,955,341.
  • 2026/2027 BRA: PJM short 208.7 MW of reliability objective
  • 2027/2028 BRA: PJM short 6,516.6 MW of reliability objective
  • Without the “Agreement” VRR curve, 2026/2027 BRA total revenue would have been $19.29B (+$3.17B, +19.7% vs. actual)
  • Without the Agreement, 2027/2028 BRA total revenue would have been $26.32B (+$9.91B, +60.4% vs. actual)
  • “In other words, the inclusion of data center load in the last two auctions increased customers’ bills by $13,768,851,483, even with the maximum price from the Agreement in place.”
  • The “Agreement” reduced the market-distorting effect by $13,083,187,831 (without it, the impact would have been $26,852,039,314)
  • Next BRA: scheduled for June 2026 (same month as Warsh’s first FOMC, June 16-17)

Market-competitiveness evaluations:

  • Energy market: competitive
  • Capacity market: not competitive on every dimension (aggregate structure, local structure, participant behavior, performance)
  • Synchronized Reserve Market: not competitive (flawed design)
  • Nonsynchronized Reserve Market: not competitive (flawed)

PJM scope (as of March 31, 2026):

  • 184,191 MW installed generating capacity
  • 1,123 members
  • 21 control zones across 13 states + DC; 67M+ people served

Regulatory/political context cited inside the SOM:

  • December 30, 2024, Docket EL25-46-000: PA Gov Josh Shapiro and Commonwealth of PA filed a complaint against PJM, asserting that the maximum price for PJM’s capacity auctions is unjust and unreasonable
  • February 20, 2025, Docket ER25-1357-000: PJM submitted proposed VRR-curve revisions to FERC under FPA section 205; the resulting agreement is termed the “Agreement VRR curve” / “restricted VRR curve”
  • “Statement of Principles Regarding PJM” — National Energy Dominance Council + PJM State Governors, February 15, 2026
  • White House “Ratepayer Protection Pledge,” March 4, 2026
  • Monitoring Analytics own “Reliability Backstop Auction Design Proposal – V4,” May 8, 2026 — the IMM’s BYONG-anchored alternative to other backstop proposals
  • PJM Board letter of January 16, 2026

Newsletter angles

  • This is the primary source for the “AI buildout drives household electricity bills” story. Every secondary outlet — SOFX, Common Dreams, Reuters — is paraphrasing. The numbers are slightly off ($13B vs. $13.77B; 76% vs. 75.5%). Newsletter angle: write the figures directly from the IMM report. Cite the exact dollar amount ($13,768,851,483) once for shock value, then use $13.77B in subsequent references.
  • The IMM’s BYONG proposal is the policy intervention worth covering directly. The IMM (Joe Bowring’s team) explicitly says the market solution is to require data centers to bring their own new generation. This is a defensible, market-based, market-monitor-endorsed alternative to backstop auctions. Newsletter angle: a Framework Hand or Stress Test on “what the IMM actually recommends versus what PJM is doing.” Most coverage describes the problem; few cover the IMM’s named remedy.
  • The “Agreement VRR curve” is the buried lede on the political backstop. PA Gov Shapiro filed a complaint in December 2024 that drove PJM to negotiate the cap. Without that intervention, the figures would have been $9.91B higher in just one BRA. Newsletter angle: name the regulatory mechanism that just barely contained the AI-buildout-incidence problem — and note that the next BRA (June 2026) will test it again.
  • June 2026 BRA aligns with the Warsh FOMC. Two distinct primary documents will land the same month: PJM’s next BRA (June) and Warsh’s first FOMC (June 16-17). Newsletter angle for the AI Cost Incidence / AI Windfall Sharing cross-domain piece: name the convergence and predict how each institution’s June output reads through the other’s frame.
  • The “1,326% new diesel” line is the editorial gold. Energy market net revenue for a theoretical new diesel plant rose 1,326% Q1-over-Q1. That figure says, more concretely than any narrative paragraph, that the marginal-cost ceiling of the PJM energy market has reset. Newsletter angle: lead a Primary Source Drop with this number.
  • “Structural market power is endemic to the capacity market” — IMM, on the record. That sentence is the kind of regulatory-tell language that crosses partisan lines. Most coverage softens it. Newsletter angle: quote it without paraphrase.

Entities mentioned

Concepts mentioned

Direct quotes worth preserving

“Reliability is a core goal of PJM. Reliability should remain a core goal of PJM. Maintaining and improving competitive markets should also be a core goal of PJM. The goal of competition in PJM is to provide customers reliable wholesale power at the lowest possible price, but no lower. That is the definition of affordability.”

“Data center load growth is the primary reason for recent and expected capacity market conditions, including total forecast load growth, the tight supply and demand balance, and high prices.”

“But for data center growth, both actual and forecast, the capacity market would not have seen the same tight supply demand conditions, the same high prices observed in the 2025/2026 BRA, the 2026/2027 BRA, and the 2027/2028 BRA, and the currently expected tight supply conditions and high prices for subsequent capacity auctions.”

“In other words, the inclusion of data center load in the last two auctions increased customers’ bills by $13,768,851,483, even with the maximum price from the Agreement in place.”

“Large data center load additions have already had a significant and irreversible impact on PJM customers that will be paid through May 31, 2028, and will have additional significant impacts on other customers as a result of higher transmission costs, higher energy market prices and higher capacity market prices.” — primary source for the “significant and irreversible” framing SOFX paraphrased

“The current supply of capacity in PJM is not adequate to meet the demand from large data center loads and will not be adequate in the foreseeable future. This is a simple factual issue.”

“The market solution is to require data centers to bring their own new generation.”

“Structural market power is endemic to the capacity market.”

“The other backstop proposals generally shift significant risk to other PJM customers… Other PJM customers, whether residential, commercial or industrial, should not be treated as a free source of insurance, or collateral, or financing for data centers.”

“All loads should be served. All loads should be served reliably. The process for adding large data center loads should be transparent. All loads should benefit from competitive markets. All loads should have equal access to the transmission system.”

Notes

This is a primary regulatory document, not journalism. Treat all figures from this PDF as authoritative; treat secondary news figures (SOFX, Common Dreams, Reuters) as paraphrases that may round, lose precision, or omit qualifiers. The next quarterly update will publish ~August 2026; the next BRA (June 2026) will surface fresh figures and a fresh round of IMM commentary before then.

The IMM’s “Reliability Backstop Auction Design Proposal – V4” (May 8, 2026) is referenced inside this report — that’s a companion primary document worth ingesting separately if the BYONG-vs-backstop policy fight becomes a newsletter beat. URL referenced in footnote: monitoringanalytics.com/reports/Presentations/2026/IMM_Reliability_Backstop_WS_%20Backstop_Auction_Design_Proposal-V4_20260508.pdf

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